Tax rebate for those who pay zakat

MUSLIMS who meet the criteria are obliged to pay the zakat or tithes, a form of income tax under the Islamic law.

In Malaysia, due to the dual system, many end up double paying their tax dues while a few use the facility to dodge tax.

This week, the Inland Revenue Board Malaysia (IRB) clarifies the uncertainties.

> Can a non-Muslim make voluntary zakat contributions and claim tax relief from it?

Zakat is compulsory only for Muslims. As the Income Tax Act 1967, Section: 6A(3) states, “a rebate shall be granted for any zakat, fitrah or any other Islamic religious dues, payment of which is obligatory.”

A Muslim has to make two compulsory payments levied on the same source of income every year, namely income tax and zakat.

Therefore, this rebate is given to relieve a Muslim from the burden of “double taxation” on the same income.

Please note that the zakat must be administered by official authorities under the purview of state governments.

As for the non-Muslims, they have the choice to make donations to approved organisations/institutions and claim for tax relief up to 7% of their aggregate income.

> I am a new Muslim, if I pay zakat (tithes) for business and personal as well as income tax, is it considered double tax? How do I declare this?

A rebate is granted for payments of any zakat, fitrah or other obligatory Islamic religions dues in the basis year (for example, zakat paid in year 2011 can be claimed as tax rebate in income tax return form for year assessment 2011).

The amount is subject to the maximum of tax charged (limited amount of total tax charged). However, the taxpayer is required to obtain and keep original receipts. (see Tax computation for Mr A)

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